Deal Case Study: $25K Wholesale Win in a D-Class Neighborhood

Dan Austin: [0:00] Hey there. Welcome back to another episode of the collecting keys Friday focus. We are here today with my boy Shane from the scale community. We're gonna do a deal case study on one of Shane's recent wholesale deals. What did you make on this wholesale deal, Shane? I think we cleared just over 25,000. So 25,000 on wholesale fee, and we're gonna talk about it. We're gonna do a deal deep dive in here. On these types of episodes, we like to go step by step through the process of how folks in our scale community are finding deals, and we like to do the highs and lows. This one, of course, is a high because Shane just told you, you made 25 k, but there was definitely a lot of challenges with this one, so I'm excited to dive into it. So let's just get after it, Shane. What kinda deal was this? Like, what specific type of asset class were you working with?

Shane: [0:43] Yeah. This is a just a single family, two bed, one bath, 820 square foot home, d class neighborhood. Mhmm. Pretty basic run of the mill wholesale deal.

Dan Austin: [0:53] I love how you call it d class because you're is this was this in Yakuba proper?

Shane: [0:57] This is. Yeah. Yeah. Right downtown.

Dan Austin: [0:59] Okay. So, For those that don't know, Yakima, Washington, Shane is his market's in, like, Central Washington. That could get pretty rough. D Class is the it's for real down there, man. So but there's still money to be made there.

Shane: [1:10] That's right. Yeah. We found lots of buyers in

Dan Austin: [1:12] that area. What was the seller demographic? How did you find them? Like, what what did the marketing look like on this thing?

Shane: [1:17] Yeah. Sure. Now, we're heavy in the mailers. This was an absentee list that we hit. No other list. It was just like a

Dan Austin: [1:23] just straight up absentee owner list. Yeah. Just straight up absentee. Real simple. Nice. And it was rented at the time?

Shane: [1:29] It was. Yeah. It it had a tenant in there. Perfect.

Dan Austin: [1:32] So absentee owner list, male, pretty basic. Nothing sexy here. Right? And this is kinda how we do deals. Mike and I are always doing deals like this. I love these types of deals. Lots of money to be made here. Single family home, just a rental property. Let's dive into the full story. I'd love to go from let's take the audience from, like, initial outreach, how that happened, all the way through your follow-up, into the due diligence on how you did this deal, and then we'll talk about the exit. And then I know there's some fun twists during the escrow process that if you're curious, this isn't just a straight up wholesale fee. Shane had to think on his feet and really brought this deal together. So, yeah, let's start at the top, man. Initial outreach and when you made contact with the seller.

Shane: [2:10] Call came in to my VA February 16. Pretty basic call, you know. She took all the general info. I was able to grasp all that info real quick, jumped right back on the phone, sounded like a motivated seller. Mhmm. Got back on the phone with them, set up an appointment immediately. When you

Dan Austin: [2:26] say it sounded like a motivated seller, like, what did they say that kinda like you saw that? I know when you see that lead, you're like, oh, I'm excited now. Like, what what was in there that they said?

Shane: [2:34] He had just described that the house was kinda broken down. He was

Dan Austin: [2:37] an older landlord, just looking to sell the property off. Sounds like when I get cold calls about my rental properties, like when I'm trying to screw with the cold callers, that's what I say. So this is this is a real deal. Any anyhow, so okay. So you booked appointment immediately. So speed to lead is all I'm hearing here. You see it come in, you get on it right away, and when was your appointment? Like, that day or the next day?

Shane: [2:57] The earliest they could meet me over there was basically that Monday this came in. I think the call came in like a Friday. Oh, perfect. Yeah. I just jumped on it as fast as I could. They didn't seem like they were really getting hit up by other wholesalers, so I wasn't too worried. I was just happy to talk with them right away.

Dan Austin: [3:12] Yeah. Absolutely. So how did that appointment go? What did you see? Like, what were you looking at? How are the sellers in person?

Shane: [3:18] Yeah. I mean, I kinda knew the area, rolled up to the house, about 50 cats came running out from underneath it. Nice. Older couple, really nice. Just started talking with them. Kinda wanted to know, you learn know, a little bit about them, see what their motivation was, see if we're gonna be able to provide the correct solution for them. And within five minutes of talking with them, he had some health issues and he was head of their properties and he said this is the worst performing property that he has, so he wanted to sell it off. Yeah. Yeah. And it was actually a really great conversation. It was right after the tax increases had come out. I think the taxes rose to about 90 on this property. He says, it's not worth it. It needs a bunch of work. I'll get rid of it for, you know, whatever. I think it's $50.55 or something. And so it was a real easy conversation.

Dan Austin: [4:04] Oh, that's nice. So that sounds like typical motivation, perfect timing with the with the the new tax rules coming out. And what I like to hear well, I don't like to hear it. It's unfortunate. But, like, you know, health issues, older guys, he's got several other properties, which means if you can make this deal work, there's opportunity to to keep working with these folks. And we find that a lot of times with their absentee owners, like when they wanna sell off their portfolio, they're kind of at the end of their landlord life, and they're like, I just wanna make this easy. I don't wanna I I don't wanna deal with this crap. They know their worst performing properties, so they wanna offload them. And if they get one to you, they might do two, three, four, however they have. So that's awesome. So it sounds like it's pretty motivated. When and how did you make the offer?

Shane: [4:42] Kinda knew. I did a little bit of research. I had a couple days to prep on this one. Came down there with a with I knew what my number was and Mhmm. Yeah. I just ended up at 60,900. They didn't wanna pay for excise tax. I said no problem.

Dan Austin: [4:55] Mhmm.

Shane: [4:56] So, yeah, just just wanted to make it as easy as possible, whipped out a contract, and we got it signed right there in the driveway. Easy peasy.

Dan Austin: [5:02] On the spot. Nice. So Yeah. With the 6900. So so so those that are listening, we have, like, we have what's called an excise or transfer task at Washington, which in Spokane County where I'm at, it's, like, 1.83 or something. Like, you guys might have a slightly lower, but it's it's right in there. So it's a it can be a significant amount, but on a on a purchase price like that, we don't even think about it.

Shane: [5:21] Right? Mhmm.

Dan Austin: [5:22] So you so you did all that math, checked the box, we'll pay for the transfer tax, and got them to sign it right then and there.

Shane: [5:28] Yeah. Exactly. Nice and easy. Thought everything was gonna go nice and smooth from there on out. So you didn't even have

Dan Austin: [5:33] to do any follow-up with it. You got the contract signed then and there, and just went and opened escrow right there?

Shane: [5:39] Yeah. Took a took a check and EMD, $100 EMD, and took it right to escrow. Got it opened up and Nice. Yeah. Came right back to the office. Got it threw it up on investor lift with some help. Yep. I think within two days, three days, we had four offers and chose chose the offer that I liked.

Dan Austin: [5:58] So let's talk about the due diligence piece. So you said you had a couple days because you had the weekend of prep. What were you thinking the ARV on this thing was and and what do you think, like, the rehab costs were? Just, rough numbers.

Shane: [6:07] Yeah. ARV in that neighborhood's anywhere from $2.50 to $2.60, and I was figuring rehab anywhere from 90 k to 100, depending on what needed to happen. The entire foundation was falling apart on this thing. Oh, so

Dan Austin: [6:19] it was smashed. It was pretty smashed then.

Shane: [6:21] That's why I decided to wholesale it. I didn't want anything to do with that project. I didn't have any contractors in my pocket that knew how to deal with that.

Dan Austin: [6:28] Yeah. That's actually a really good point to talk about. So this this house, there's a lot of meat on the bone here. You're getting that 60,900, you know, maybe you're at like 62 all in, 63 all in with if you were to buy it yourself with with the transfer tax and the closing cost. $2.50, I mean, that that's that's a 190,000. I mean, the carry costs are low. There's a lot of goods about it, but where you're at in your business, so let's maybe talk about that right now. So you went to you've been in in the scale community for a bit now, and you went to KeyesCon last fall, and you you just doubled down and committed, like, I'm doing this, and you left your job, like, what, a month before this? Like, you left your w two maybe a month before this, Carter, maybe six weeks?

Shane: [7:09] Yeah. That was it, man. You know, just I gotta maintain that high level of focus and just went all in, and and doing the wholesale thing is obviously the faster way to grow some capital and create a a wheel and Right. And just adds to the investing part of it that much easier once you get

Dan Austin: [7:24] that initial wheel going. Get that massive income, and that and I think that's the point to be made here is like, yeah. Sure. You could have flipped it, and it was so tempting, but that's a ton of money to tie up. So you're gonna tie up, you know, over a long period of time because, like you said, you didn't have a contract with that kind of experience to do that stuff. So maybe you're into this thing for six months and 150,000, you know, out of pocket. Maybe the quick win, the quick turn and burn on the wholesale was the right thing to do. So let's talk about that piece too, because you're not I'm not gonna call it a rural market, but like a smaller market where you're at. And so there's definitely an investor presence, like, no doubt, and I know that even in the adjacent markets around you. But you you decided to throw it on InvestorLift. Talk about, like, kind of the wholesaling in your market, why you decided to go with Investor Lift. Did you actually try to find buyers before that, or what was your goal there? Or, I guess, what was your reasoning?

Shane: [8:16] Yeah. I mean, I have pretty good resources as far as a buyer's list and some good contractors in the area that do flips themselves, and I brought one of them along, and understanding the investor lift, you're reaching out to so many more buyers. I know. The buyer pool is huge, and then you're able to reach all the way across Washington. We have a lot of guys on the West Side that invest in Yakima, Tri Cities, all of Central Washington. So what it enabled me to do is just blast this out to so many more eyeballs.

Dan Austin: [8:44] Yep. Yeah.

Shane: [8:45] And essentially, we did get a better offer than most,

Dan Austin: [8:48] and and most of those other offers were five zero nine area code. So this other guy came from the West Side. Wow. So, yeah, just so you guys know, when when talking about Investor Lift for the scale community, we we offer we have the Artemis mode, the god mode, all that stuff for our scale community members so they can throw out deals on Investor Lift no matter what market they're And I've been blown away the last couple things we've done where, same thing, we've had some personal deals, we've moved on there. You're getting other people that you would have never connected with, and you need to underwrite those buyers just the same, because there is risk in going with somebody that you don't know, especially if they're not local. But, I mean, I bet you when you got that offer, you were probably pretty stoked.

Shane: [9:26] Oh, yeah. I mean, it was, you know, I put it up there and it was full offer, so Yeah. I had expected it. I ran the numbers, and I was pretty confident in them. Overall, the return for that deal was great, and any investor that took it up should do pretty well.

Dan Austin: [9:38] Yeah. Exactly. That's awesome. So let's talk about getting into escrow because the timeline we're talking about, I think you got this thing, like, February 16 when the first lead came in. You or when it came in, you obviously locked it up within a few days of that, but you closed May 6. So it's a little bit longer escrow, and you had some drama in here. Let's just kinda run down what escrow looked like and what you end up having to do to get this deal to close.

Shane: [10:00] Yeah. Escrow, I thought it gonna be pretty basic. We started rolling through there. They did have the tenant in there, and they wanted she they gave them about a month, which I got humbled real easy. She gave me the reins and said, Hey, why don't you just stay in contact with them, so as soon as they're out, you can close escrow and go through the process. And I made one phone call, and it was actually to the son of the tenant in there. Real touchy situation. He was very unhappy with me calling, asking when his mom was gonna be out. So that was the first hiccup. I thought I might have screwed up that relationship. As we kinda went through, did finally get the phone call that they were out. As we kinda moved through there, you would think that the buyer would have had their lending all squared away. And I knew they were using hard money lender. They ended up called him. He says, ah, you know, dropped they dropped me out. I don't know what's going on. So we're ready to close. Now they don't have a lender. So that was the start of the mess. You know, of course, I had gotten $5,000 EMD from him, and he did not wanna lose that. He expressed that. He says, you know, so he's highly motivated to go after some more lending and get this thing closed. We did have the contract written out till April 30, I think. So he did have some time. During that time, I'm getting phone calls from the seller.

Shane: [11:10] She's a wonderful lady, super nice, and she expressed in a conversation, she's like, look, now I'm missing another month's rent. I wasn't, know, my I got my tenant out. So immediately, I said, what were you getting for rent? And she says, $600. I said, can I get you a $600 check? Yep. Keep that

Dan Austin: [11:26] That's awesome.

Shane: [11:26] Keep that good working relationship. Keep the deal off Easy. Yeah. Went ahead, did that. She was very grateful for that. She understood being a landlord slash developer, how banks work and lending, so that made the deal go that much easier. She was very honest and open. She was very happy that I was too with her. She was totally understanding because of that and didn't seem to be buttoned up as we kinda yeah, we just went through, got a call from Tidal. I thought, oh, this is good. They're gonna tell me some good news. They said, hey, there's a old note holder still on title that never signed off. Nice. I said, what are you talking about? So they had to go through, find this guy. Luckily, it was a local investor, they got him down there, the guy was like 85 years old, signed signed off on the old You know?

Dan Austin: [12:11] So lucky that guy wasn't dead because that would've

Shane: [12:13] just it would've been more so much more work. Totally. Yeah. Deal killer. Yep. So we got moving through that part of it. We're coming up on the April 25 here, and lenders still kinda hem hawing, you know. And and what had happened was the couple guys that formed this LLC, one of the guys had another LLC that owned this his share, and it had, like, five guys in it. One of the guys wasn't a part of it anymore, and so the lender was just and their underwriting was being super meticulous and causing a lot of issues with all those members of the LLCs. So that was a little bit of a learning curve. These buyers were excellent. Getting them all the documentation immediately, that helped out greatly and set a good tone with me as well. All in all, we get to about April 30. I'm like, hey. We're ready to close on this thing. You know, title still hasn't heard from the lender as far as getting a final HUD back and back and forth, and I'm calling everybody. Yeah. I'm calling the seller, making sure they're good. I'm calling the buyer, what's going on? Calling the lender, calling title. Yeah. Just keep it on top of everybody every minute. They came back and they said, hey. They want $10 extra cash to close this thing, and we would like to know if you would hold the note for us. Yeah.

Shane: [13:27] And I'm thinking, oh my gosh. You know, I don't even know these guys. I don't know their history. Yep. They did build a great rapport with me and being so quick on the phone. One of the guys was a broker for a at our zone brokerage, so I kinda trusted that. Yep. I said, give me an hour. I'll give you a callback. So I made a couple phone calls to really trusted advisers and mentors and got their input and made a callback. I said, hey, you know what, man? $10 ain't that much. You guys gotta come up with it. And they're like, look, know, we're going back and forth. We got a lot of guys on this. If you would just hold it. And I said, look, how about I hold five? You bring the other five that you need, and I'll do it at 12%, and I'll write up a note with a deed and trust, and we'll go from there. And he was like, Yeah, that'll work, man. Thank you very much. And so at that point, I had no idea how to do all that. My title company basically said, hey. You know? Here's how we would do it, but we can't do it for

Dan Austin: [14:21] you. Yeah.

Shane: [14:22] And so I had to kinda muster my way through there. Luckily, I had just closed a seller finance deal Nice. Earlier, and I kinda referenced all those documents that I had to sign. Yep. Used them the exact same way. Yep. And and the only thing their lender wanted was to re make sure it was recorded after theirs was recorded so that they didn't wanna hear about it, know about it, they didn't care if there's a second later. So

Dan Austin: [14:44] Right.

Shane: [14:44] Yeah. I just pushed through to the end and finally got the call that it had closed, so everybody was happy.

Dan Austin: [14:49] So you turned that with, like, the 25,000 into actually 20 in your pocket and then some cash flow basically, or or $5 in the future plus 12%.

Shane: [14:58] Yeah. Exactly. Yeah. I put a year balloon on it. Okay. And then, yeah, just put the just 12%. I just told them, you just pay me when the deal sells at the end. Don't wanna deal with a monthly payment or anything like No.

Dan Austin: [15:08] They'd be paying for that. That's awesome, man. So, I think what Just for the listeners out there, that speaks to what you have to do, and why we, as off market operators, as wholesalers, make our money. It's not because it's easy, it's because, I mean, I heard you're talking to a lender, you're talking to titles, sellers, buyers, and you're solving problems. I mean, how many people are willing to write their seller a check for $600? I mean, you just snapped to, like, that was the right thing to do, I'm gonna do it. Not stepping over dollars to pick up pennies, which a lot of people get caught up in. It's just like, just do it. You got 20 something thousand dollars on the line. It's worth $600. And then to really negotiate and solve that problem for the buyer and keep them engaged, you knew that they wanted to close. They didn't wanna lose $5, and so keeping them engaged and getting that deal done and being so creative, I mean, that's you earned this, man. So congrats. Hats off to you. Love it. Anyways, we'll close this out. I just wanna reiterate, you know, Shane, I really appreciate you coming to KeyesCon and watching the intentionality you took after that last fall. Like, you're leaving your w two for you to do it so you could dive into this full time. It's pretty amazing, man. So literally, I'll say it again, hats off to you.

Dan Austin: [16:15] You've done a fantastic job kind of like just following the right steps and and exactly what guys like Mike and I would want you to do if we wanna see if you truly wanna be successful, and you're you're really doing it, So awesome. Is there somewhere, anybody that wants to do deals with you down in Central Washington area, Yakima, that they can reach out to you or connect with you?

Shane: [16:33] Yeah. Thanks for the kind words, Dan. Yeah. You guys can reach just regular email, lunchboxhomebuyersyahoo dot com.

Dan Austin: [16:41] Perfect. I love it. Lunchbox homebuyers. Dude, that's awesome, man. So can kinda connect why that was the case, but I'll I'll leave that up to the audience to figure out. So anyways, thanks, Shane. We will see you all next week. See you.